Welfare Analysis in Games with substitutabilities
AbstractThis paper investigates the social optimum in network games of strategic substitutes and identiﬁes how network structure shapes optimal policies. First, we show that the socially optimal proﬁle is ob-tained through a combination of two opposite network eﬀects, generated by the incoming and the outgoing weighted Bonacich centrality measures. Next, three diﬀerent policies that restore the social optimum are derived, and the implications of the predecessor(s)-successor(s) relationship between the agents on each policy instrument are explored. Then, the link between optimal taxes and the density of the network is established.
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Date of creation: 17 Sep 2012
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network game ; social optimum ; Bonacich centrality ; opti- mal policy ; spectral radius.;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-30 (All new papers)
- NEP-COM-2012-09-30 (Industrial Competition)
- NEP-GTH-2012-09-30 (Game Theory)
- NEP-MIC-2012-09-30 (Microeconomics)
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- Nizar Allouch, 2013.
"The Cost of Segregation in Social Networks,"
703, Queen Mary, University of London, School of Economics and Finance.
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